(Commonwealth) _ Recent research has highlighted a significant trend: an increasing number of landlords are leaving London as the number of rental properties available in the capital reaches a new low. This decline in supply is expected to place additional pressure on tenants, potentially driving rental prices even higher. The latest data from TwentyCi, which examines the number of properties listed for sale in July 2024 that were previously rented out, reveals that over one-fifth (22%, or 617 properties) of newly listed properties in inner London had been let out within the last decade. This figure represents a ten-year high since TwentyCi began tracking this data and stands in stark contrast to the 15.6% (395 homes) in July 2023 and 12.9% (187 properties) in July 2019, the latter being before the COVID-19 pandemic.
This rise in the number of landlords exiting the London market is even more pronounced when compared with the national average. Across the UK, only 9% of homes listed for sale in July 2024 had been rented out over the past decade, significantly lower than the figures observed in London. The data suggests that landlords are increasingly turning away from London due to a combination of factors, including high property prices and low rental yields. While house prices and rents in inner London remain considerably higher than the national average, this doesn’t necessarily translate into higher profits for landlords. TwentyCi’s report notes that the average asking rent in inner London has climbed to £2,399 per month, compared to the UK-wide average of £1,869 per month.
In parallel, Rightmove’s latest figures show that the average property price in London has reached £750,153, making it the least affordable city in the UK for both buying and renting. For property investors and landlords, these high prices often lead to lower rental yields. Recent research from Zoopla indicates that the highest rental yields in the UK are currently found in the North of England, particularly in the North East and North West, where yields can exceed 8%. In contrast, London offers some of the lowest average yields, at just 4.95%. The situation is further complicated by the rising costs associated with mortgages. As mortgage rates have remained higher in recent years compared to the pre-pandemic era, they are increasingly cutting into the overall returns for landlords, especially in expensive areas like London. This has prompted many landlords to seek better rental yields elsewhere, contributing to the trend of landlords leaving London in search of more lucrative opportunities in other parts of the country.
Another factor influencing this exodus is the changes in tax relief on mortgage interest payments. Since the rules around claiming tax relief were altered, the financial viability of holding rental properties in high-cost areas has come under scrutiny. Even though mortgage rates have improved throughout 2024, they are still higher than they were two years ago, further eroding landlords’ profits. In response, many have increased rents to offset some of these costs.
However, this strategy is more challenging in London, where high property prices mean higher borrowing costs. In contrast, cheaper areas in the North and Midlands offer more affordable options, allowing landlords to either buy with cash or take on much smaller mortgages, making them less vulnerable to rising rates. This financial dynamic is likely driving more landlords to consider diversifying their portfolios by investing in regions where they can achieve greater affordability and potentially higher rental yields. The trend of landlords leaving London appears to be driven by a combination of high property prices, lower rental yields, and increasing mortgage costs. As landlords seek better returns on their investments, many are turning to the North and Midlands, where they can find more favorable financial conditions.
